Entry Mode Selection, Location Choice and the Sequence of Internationalization: A Case Study on Ranbaxy Laboratories Ltd.

Md Masrurul Mowla, Nazamul Hoque, Abdullahil Mamun, Mohammad Rahim Uddin

Abstract


Due to increase of a good numbers of multinationals firms from emerging economies, researchers’ attention have been paid toward understanding the internationalization sequence of these companies. For making the internationalization process successful, multinational enterprises (MNE) make some strategic decisions like entry modes selection, site selection very carefully and delicately. Since, pharmaceutical industry in India has been growing rapidly and achieved the recognition of the world as a high quality manufacturer at low cost, it is the interest of researchers to investigate how Indian emerging multinationals are taking decisions in case of entry mode selection and location choice. In this regard, Indian Multinational enterprise ‘Ranbaxy Laboratories Limited’ is an ideal case to study because it has developed its capabilities to compete against incumbent MNEs by using different motives, entry strategies and locations advantages. In this case study, relevant foreign direct investment (FDI) literature and other secondary sources have been used to analyze the strategies used in case of locations choice and entry modes selection for Ranbaxy’s Outward Foreign Direct Investment (OFDI). It has been observed that in case of location choices and entry modes selection, decisions varied significantly for different regulated markets. Initially, Ranbaxy entered into Africa and Asian market and after gaining experiences and knowledge from there it moved to USA and Europe. The study reveals that Ranbaxy has chosen entry mode as ‘acquisition’ for USA and European market basically to overcome made-in-India image, credibility issues and quality concern. Furthermore, Ranbaxy offered their product and services more confidently as a guarantor of quality and safety standards due to acquisition strategy. Since, most of the European and North American markets were regulated and Ranbaxy entered these markets using unique entry modes. On the other hand, Asian and African markets were unregulated and entry modes were different from regulated markets. Ranbaxy entered first into the unregulated markets then moved to the regulated markets. For different segments Ranbaxy were driven by different motives. Thus, company developed experience and expertise from different markets. Apart from this, company found various types of capability handicaps in different markets and responded accordingly to overcome these handicaps. Consequently, these sequential developments have been transformed into ownership specific advantages for Ranbaxy’s case. Considering extant strength and capabilities of Ranbaxy, market seeking motive could be the stimulating factor for Ranbaxy’s next expansion for maintaining sustainable growth and position in the international market. European countries like Cyprus and Greece could be the location choice for next market expansion. In case of choosing European countries, Ranbaxy could minimize psychic distance, technological, economical, and institutional and location distance as it has strong local image in the European countries

Full Text: PDF DOI: 10.5539/ass.v10n6p145

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Asian Social Science   ISSN 1911-2017 (Print)   ISSN 1911-2025 (Online)

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